Construction is one of those sectors that really responds to moves in the overall economy. So with the Alberta economy entering a slightly more uncertain period, it will be interesting to see how construction activity fares.

Alberta’s developers and contractors took out permits for $1.18 billion worth of projects during August, the highest monthly amount since February and the second highest in the last 12 months. Driving construction intentions higher was the non-residential side of the business (+20.6 per cent month-over-month), while residential permits sagged slightly (-4.3 per cent month-over-month).

Statistics Canada noted that a jump in industrial and institutional projects drove the increase, while lower single-family dwelling intentions were behind the drop in residential intentions.

While building permits themselves don’t generate GDP or jobs, they are one of the first steps in the construction process. Hence, they are an excellent leading indicator for construction activity, a sector that accounted for around 8 per cent of the provincial economy in 2010.

The residential side of Alberta’s construction business has been pretty slow in 2011, with permits year to date down 6.2 per cent from 2010 (which itself was not a blockbuster year). Non-residential has fared better, although this is largely due to one massive permit ($597 million) taken out earlier in the year for a project at the Calgary airport.

Residential construction has been slow for quite a while but it is bound to pick back up eventually. However, with the economy back in uncertain times, this recovery could still be a ways away.